Capitated reimbursement
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Capitated reimbursement is a health management plan which pays health care service providers a set amount of money to provide health care based on the number of people covered in the plan. This is a recent effort of insurance companies and large corporations to reduce health care costs. Providers who work under these plans focus on preventative health care as it is far less expensive to keep a person from becoming ill than it is to treat them once they are ill.
Understanding Capitated Delivery Systems
While some providers imagine that they are primarily accepting and managing clinical services over which they have a good deal of control, this is not the case. The financial risks providers accept in capitation are traditional insurance risks. Providers, in lieu of a fixed payment per enrolled client, agree to provide the unknown future costs associated with clinical care. This shift means that the providers become the enrolled client's insurers, resolving claims for care in face-to-face interactions, at the point of care. Since providers have fixed revenues, each enrolled client makes their claims against the full resources of the provider. In traditional fee-for-service reimbursement there is a tendency to over-prescribe, over-diagnose, and over-treat to secure more revenue. The corollary practices are to under-prescribe, under-diagnose, and under-treat clients to reduce costs, and achieve maximal net revenue.
Unfortunately, few providers disclose their role in these matters, preferring to describe denials of services to managed care plans, insurers, or case managers when it is actually a decision that they alone are making. As well, since the risk premium insurers charge for risk assumption is always based, among other things, on the portfolio of risks that it is currently insuring, the size of the risk premium varies by the size of the insurer. Small insurers, such as health care providers, ought to receive much larger risk premiums when they assume small portfolios from insurers. Unfortunately, insurers cannot fund these larger risk premiums, leaving health care providers underfunded. Since health care providers are being inadequately compensated because of the inefficiencies introduced simply by moving to capitation, securing reinsurance is not an option. The amount a reinsurer would want to insure the insurance risks assumed by health care providers would add yet another level of inefficiency to the situation, depriving health care providers, of badly needed funds.
